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While some Asian markets continued to march higher overnight, overall international equity market action has mostly remained mixed into the US Tuesday morning trade. The market will continue to see earnings news today but the earnings influence is probably going to continue to wane and the interest in the direction of the economy from the scheduled numbers is probably going to increase. With the US scheduled to see a Case-Shiller home price survey, ahead of the opening this morning, a Consumer Confidence reading shortly thereafter and then a potentially critical kick off to another US Treasury auction cycle later on there will be no shortage of potential market moving events today. While some international markets seem to be capable of discounting the extended string of daily gains on the charts, we think that is an issue, that is not only limiting the upside capacity but that the overbought condition is also increasing the odds of a coming over valuation correction. In fact, we think that current prices have already set a very high bar for the data and the coming US Treasury auctions but the lack of a bearish catalyst, has allowed the bull camp to retain control. In fact, we would suggest that the stock market will need some early help from a favorable Case-Shiller report just to restart the upward bias today, as a favorable home price survey will be needed to fully confirm that the US housing market has indeed turned the corner.
S&P 500: Surprisingly oil prices and oil sector stocks aren’t under pressure this morning, in the wake of reports that the CFTC might reveal a report that suggests speculation has resulted in increased volatility. In fact, the market is not showing any vulnerability off the speculation rumor mill and with an ongoing pattern of higher lows and higher highs on the charts, it would seem like the bull camp is set to retain control again. However, unless the markets can suggest that the US housing market had indeed turned the corner, off the latest Case-Shiller readings, we will continue to favor short side plays.
DOW: We continue to think that the Mini Dow is overbought and vulnerable to a setback, but without a specific increase in anxiety, from a distinctly negative scheduled report or from the upcoming Treasury auction results, the bull camp probably won’t lose control of this market. However, we do think that the market is sitting at a level where the reports have to be conducive to the bull camp or prices will recoil. While the September Mini Dow has solid and initial support at 9,000 on the charts, the failure to hold above 8,991 could be considered a more significant failure. Some traders are already suggesting that the Mini Dow has violated a close-in uptrend channel support line, with the weak action since yesterday’s highs.
NASDAQ: The Nasdaq would seem to be losing a bit of upside momentum over the past three trading sessions. While the bull camp will suggest that the market has gained a critical support level of 1600, we see the rate of gain since the middle of July as an extreme over reaction, especially when one realizes that the next jobs report could show continued deterioration in the US employment sector. As suggested already, pushed into the market we would favor the short side, but so far the bear camp hasn’t been able to find a distinctly bearish catalyst to take control of this market away from the bull camp.
TODAY’S MARKET IDEAS: We continue to think that the market is factoring in too much optimism but there doesn’t seem to be much in the way of anxiety swirling in the marketplace.
